Sharikat Logistics Pte Ltd v Ong Boon Chuan and others

1. Judith Prakash J:

2. Introduction

3. [1]

   [1] This case arises from a dispute amongst the shareholders of the fifth defendant, TG-SN Pte Ltd (“the Company”) who are:

4. (a) the plaintiff, Sharikat Logistics Pte Ltd (“Sharikat”), which holds 40% of the Company’s issued share capital;

5. (b) the fourth defendant, TG Development Pte Ltd (“TGDPL”), which holds 51% of the Company’s issued share capital; and

6. (c) the third defendant, Kok Yin Leong (“KYL”), who holds the remaining 9% of the Company’s issued share capital.

7. [2]

   [2] The Company was incorporated on 21 April 2006 as a joint venture between TGDPL and Sharikat in order to construct and manage an industrial development. The original directors of the Company were the first defendant, Ong Boon Chuan (“OBC”), who was also the sole director and controlling shareholder of TGDPL, and Phang Say Lang, also referred to as “Joseph” (“PSL”), who was a director and majority shareholder of Sharikat. Subsequently, the second defendant, Ong Kai Hoe (“OKH”), also became a director of the Company. As the relationship between PSL and OBC broke down, PSL/Sharikat were often represented at the Company’s meetings by PSL’s younger brother, Pang Sheh Fatt, also referred to as “Sean” (“PSF”). PSF served as an assistant general manager of Sharikat.

8. [3]

   [3] Sharikat’s case is that OBC used TGDPL’s position as majority shareholder of the Company and his own position as its nominee on the board of directors the Company (“the Board”) to oppress Sharikat as a minority shareholder. This was done initially in collusion with KYL and, later, with OKH as well. It is relevant that OBC is the father of OKH and the brother-in-law of KYL.

9. [4]

   [4] TGDPL and OBC, who were represented by the same solicitors, contend that far from being a case of minority oppression, this is a case of Sharikat abusing the process of the court in order to extract the maximum price for its 40% stake in the Company. From their perspective, Sharikat is a disgruntled shareholder who wants out of the Company on the best possible terms.

10. [5]

    [5] KYL and OKH take similar positions. KYL was a minority shareholder at all material times and OKH was never a shareholder of the Company at all. As such, each of them says that he can only be made liable for oppression if Sharikat is able to show that he was an “actor” and “played a major role” in the oppression or was directly involved in the transactions leading to the oppression. They assert that Sharikat has not met this threshold.

11. [6]

    [6] The Company has taken a neutral position and is content to abide by the decision of the court.

12. Background

13. [7]

    [7] I will set out the background briefly before summarising the allegations that Sharikat has made. I will go into the facts in more detail as I discuss the various issues and allegations.

14. [8]

    [8] The main individuals involved in this dispute are PSL and OBC. PSL is a businessman with experience in industrial construction and development and holds 90% of the shares of Sharikat. OBC is a very successful businessman who owns and/or controls several companies and has an interest in many others. I will refer to the companies connected with OBC collectively as “TG Group”. The TG Group includes TG Properties Pte Ltd (“TG Properties”) and TG Realty Pte Ltd (“TG Realty”). OBC has been in the business of building construction and real estate development for more than 30 years. However, he had no experience in industrial development prior to the formation of the Company.

15. [9]

    [9] As of 2003, KYL, an architect running his own practice, and PSL had been friends for many years. At about that time, OBC and PSL became acquainted. They got on well and made a few joint tenders for construction projects. In February 2006, PSL learned that the Jurong Town Corporation (“JTC”) was calling for tenders to develop and lease out 18 units of single-storied terraced factories with mezzanine ancillary offices (“the Units”) at Lot 1967C MK34 (Plot N) at Banyan Drive, Singapore (“the Property”). PSL then approached KYL to discuss the possibility of a joint tender by KYL and Sharikat for the development (“the Project”). KYL suggested that OBC be asked to join in the Project. Subsequently, the three men agreed to set up a company to undertake the Project if the joint tender was successful.

16. [10]

    [10] PSL, KYL and OBC started work on a tender and agreed that, pending the formation of a joint venture company, the tender would be submitted by TGDPL. The tender was duly submitted to JTC on 3 March 2006 (the “bid submissions”) and on 30 March 2006 JTC sent TGDPL a letter (“the Selection Letter”) stating that it had been selected as the developer of the Project. The Company was incorporated a few weeks later with the shareholding split 60:40 between TGDPL and Sharikat. There had been some discussion about giving shares to KYL (the exact proportion is a matter of dispute) but on incorporation this did not materialise as KYL did not have the funds to participate in the joint venture at that time. In 2008, TGDPL transferred 9% of the issued shares of the Company to KYL.

17. [11]

    [11] The paid up capital of the Company was $500,000 of which TGDPL provided $300,000, while Sharikat provided $200,000. PSL and OBC were appointed directors of the Company on incorporation. Initially, the Company’s bank account was operated by KYL and PSL as joint signatories. On 7 December 2007, OBC became a joint signatory in place of KYL.

18. [12]

    [12] On 24 May 2006, JTC sent TGDPL a further letter (“the Offer Letter”) which contained the terms and conditions upon which JTC was prepared to allocate the Property to the Company. The Offer Letter stated that the licence of the Property would commence on 19 June 2006 and once construction of the Units had been completed, there would be a 20-year lease of the Property with effect from the licence commencement date. The rental would be $121,500 per annum. On 2 June 2006, TGDPL informed JTC that the new entity incorporated to execute the Project was the Company and, on the same date, the Company itself wrote to JTC accepting the terms and conditions set out in the Offer Letter.

19. [13]

    [13] The parties agreed that TG Properties would be the main contractor for the construction of the Project but that PSL would supervise it. They further agreed that a bank loan would be taken to finance the Project. Accordingly, a loan facility of up to $2.8m (the “construction loan”) was secured from Hong Leong Finance Ltd (“Hong Leong”). The repayment of the construction loan was intended to come from the rental of the Units. The Company appointed Ms Tan Meow Hwa of AC Consortium Pte Ltd as the Project Architect. It was agreed that KYL would be involved in the administration of the Project and would prepare and submit all progress claims under the building contract for and on behalf of TG Properties for certification by the Project Architect.

20. [14]

    [14] The Project commenced in June 2006. Construction went smoothly and the Units were completed in mid-2007. The temporary occupation permit was issued on 13 June 2007. Shortly thereafter, all the Units were occupied by tenants acceptable to JTC.

21. [15]

    [15] Disputes between OBC and PSL began in or about late 2007.

22. The legal principles

23. [16]

    [16] This action is based on s 216 of the Companies Act (Cap 50, 2006 Rev Ed) (“the Act”), a section that has been frequently invoked in our courts. It provides for protection of a minority shareholder where:

24. (a) the Company’s affairs are conducted or the directors’ powers are being exercised:

25. (i) in a manner that is oppressive to the shareholder; or

26. (ii) in disregard of the shareholder’s interests;

27. (b) or an act is done or threatened or a member’s resolution is passed or proposed which:

28. (i) unfairly discriminates against one or more shareholders; or

29. (ii) is otherwise prejudicial to one or more shareholders.

30. [17]

    [17] The provisions of the section have been considered in many cases and the principles to be used in applying it are fairly well established. Therefore I will not embark on a detailed discussion of the law. The case of Over & Over Ltd v Bonvests Holdings Ltd [2010] 2 SLR 776 (“Over & Over”) clearly expresses the main principles. The test is whether there is a visible departure from the standards of fair dealing and a violation of the conditions of fair play which a shareholder is entitled to expect (at [77]). The unfairness that has to be established is commercial unfairness (at [81]). It was held also that in deciding whether to grant relief under s 216, the court has to take into account both the legal rights and the legitimate expectations of members (at [78]). Further, in the situation of a quasi-partnership company, due to the peculiar vulnerability of minority shareholders in such companies premised on informal understandings and assumptions, the court should apply stricter scrutiny (at [83]).

31. [18]

    [18] I will not elaborate on the law here but will deal with it as and when it may be necessary in the course of discussing the issues.

32. The oppressive conduct

33. [19]

    [19] The alleged oppressive conduct undertaken by the first and fourth defendants has been summarised by Sharikat as follows:

34. (a) Claim for agency fees by TG Realty

35. It had been agreed, prior to the tender for the Project that TG Realty would be appointed to secure tenants for the Units. However, after the bid was won, PSL and KYL were informed by JTC that it had already matched the Units to tenants. As such, Sharikat took the position that TG Realty did not need to, and did not in fact, do any work to secure tenants for the Units. However, the defendants insisted that TG Realty should be allowed to claim $50,000 as agreed agency fee and, on 10 November 2008, OBC and KYL passed a shareholders’ resolution to that effect.

36. (b) Refusal to pay for accounting and administrative services (“the Services”) rendered by Sharikat despite paying the TG Group for the same

37. The Services were provided by Sharikat and by the TG Group at various points in time. At a shareholders’ meeting on 30 May 2008, it was agreed that Sharikat and members of the TG Group should be entitled to claim fees for the Services they had rendered in the past. However, at a meeting on 10 November 2008, TGDPL and KYL voted in favour of a resolution not to pay Sharikat but only to pay the TG Group for past Services.

38. (c) Issue of wrongful Progress Claims by TG Properties

39. Sometime in December 2010, Sharikat discovered that the Progress Claims for the Project had included items of work which had either not been carried out (ie, the “Air-Conditioning & Mechanical Ventilation” works (“the ACMV Works”)) or were not supported by any documentation (ie, variation works that were not accompanied by any variation orders issued by the Project Architect (“the Variation Works”)). Despite the fact that Sharikat raised these irregularities at the 4 January 2011 extraordinary general meeting (“EGM”) and at the 14 February 2011 EGM, OBC and OKH proceeded to authorise payment of the last remaining unpaid progress claim (ie, Progress Claim No 10) to TG Properties in March 2011.

40. (d) Refusal to pay PSL the Project Management Fees

41. In breach of the parties’ agreement to do so, OBC refused to pay PSL the $15,000 agreed project management fee.

42. (e) Refusal to distribute profits of TG Properties in breach of the profit-sharing agreement

43. In breach of an alleged profit-sharing agreement, OBC refused to distribute TG Properties’ profits and denied the existence of the profit-sharing agreement.

44. (f) Attempts to remove PSL as director and to vary the bank mandate

45. After PSL refused to authorise payment of agency fees to TG Realty, OBC sought to have him removed as a director of the Company and to vary the bank mandate which at that stage required all cheques to be signed jointly by OBC and PSL. To this end, OBC circulated signed resolutions purporting to accept PSL’s resignation as a director, adding PSF and KYL as directors and varying the bank mandate to include KYL as an alternate signatory to PSL. OBC also requisitioned meetings on 10 November 2008 and 10 March 2009 to procure the passing of these resolutions.

46. (g) Appointment of OKH as director and variation of the bank mandate

47. After failing to have PSL removed as a director at the 4 January 2011 EGM, OBC used TGDPL’s majority vote at equity level to have his son, OKH, appointed as a third director of the Company, and to vary the bank mandate to include OKH as an alternate signatory to PSL. This allowed OBC and OKH to dominate the Board and to jointly approve payments without having to obtain PSL’s approval.

48. (h) Appointment of OBC as managing director and introduction of a remuneration of $7,000 for OBC

49. OBC used TGDPL’s majority vote to have himself appointed as the Company’s managing director at the 4 January 2011 EGM. This was in spite of Sharikat’s objection there was no need for the Company to have a managing director. Thereafter, although the Company had never paid its directors any remuneration in the past and the directors had few or no executive duties, OBC used TGDPL’s majority vote to introduce a remuneration of $7,000 per month for himself as managing director at the 14 February 2011 EGM. He also introduced directors’ remuneration of $1,000 a month for OKH and PSL.

50. (i) Refusal to declare dividends

51. At the 14 February 2011 EGM when the issue of dividends was raised by PSF, OBC refused to declare dividends although the construction of the Project had long been completed and at the time the Company had a surplus of approximately $700,000 in its coffers.

52. (j) Attempt to dilute Sharikat’s shareholding in the Company

53. After the commencement of this action, OBC sought to raise a rights issue on the alleged basis that the Company needed funds to repay the construction loan and for future expansion. In fact, there was no urgency to repay the loan and the Company was a single purpose vehicle to develop and manage the Project. The true purpose behind the rights issue was to dilute Sharikat’s shareholding in the Company.

54. (k) Not keeping Sharikat informed of Company matters

55. PSL and Sharikat were kept in the dark on key matters relating to the Company.

56. [20]

    [20] By virtue of the acts set out in paras 19(a), 19(b), 19(c), 19(g), 19(h) and 19(j) above, namely:

57. (a) the claim for agency fees by TG Realty;

58. (b) the refusal to pay for the Services rendered by Sharikat despite paying the TG Group for the same;

59. (c) the issue of wrongful Progress Claims by TG Properties;

60. (d) the appointment of OKH as director and variation of the bank mandate;

61. (e) the appointment of OBC as managing director and introduction of a monthly remuneration of $7,000 for OBC; and

62. (f) the attempts to dilute Sharikat’s shareholding in the Company,

63. OBC has also acted dishonestly and in breach of his fiduciary duties as a director of the Company, and OKH, KYL and/or TGDPL have induced, procured and/or assisted in the said breaches and are to that extent liable for oppression as well.

64. The issues

65. [21]

    [21] Generally, the issues to be decided appear clearly from the summary above of Sharikat’s contentions. There are, however, two issues which must be considered before the individual oppression points are dealt with. The first is whether the Company was at all material times a quasi-partnership as Sharikat alleges or a company in which there was a majority shareholder (TGDPL) and a minority shareholder (Sharikat), the latter being content to hold that position. The second “preliminary” issue arises out of the dispute between the parties as to whether the Company was intended to be a single-purpose company.

66. Is the Company a quasi-partnership?

67. Sharikat’s arguments

68. [22]

    [22] Sharikat avers that the Company was at all times a quasi-partnership and that the relationship between the parties was based on mutual trust, goodwill and confidence. As a result, it was Sharikat’s legitimate expectation that:

69. (a) Sharikat was entitled to nominate a Board representative and that representative would participate in and not be excluded from the management of the Company’s business and operations;

70. (b) Sharikat and its Board representative would be involved in and consulted on all important decisions of the Company.

71. [23]

    [23] Sharikat relies on the following in support of its contention:

72. (a) PSL’s evidence that the original understanding was that Sharikat and TGDPL would be equal partners with each of them holding 40% of the shareholding and KYL holding the remaining 20%. However, since KYL’s financial difficulties precluded him from subscribing for his intended allocation of 20% of the shares, it was agreed that TGDPL would subscribe for KYL’s allocation first and that was the only reason why, upon incorporation, TGDPL held 60% of the shares while Sharikat held 40% of the same.

73. (b) PSL’s evidence that he had first approached KYL, his old friend, to discuss a joint tender for the project and it was KYL who suggested that OBC also be involved. This evidence was not challenged at trial. KYL corroborated PSL’s evidence on the close relationship between PSL, OBC and KYL.

74. (c) It was put to PSL in cross-examination that there was no quasi-partnership because OBC wanted to be the majority shareholder. PSL disagreed and stood firm on his evidence.

75. (d) OBC’s own admissions during trial showed that the parties considered the joint venture to be a quasi-partnership:

76. (i) He admitted that he and PSL had been friends before the Project;

77. (ii) He admitted that he had trusted PSL and his relationship with Sharikat had “definitely” started off as a relationship of trust;

78. (iii) Although insisting that the Company was a joint venture incorporated with shares, he and PSL regarded each other as partners; and

79. (iv) OBC also made repeated references to a “gentleman’s agreement” which suggests that his working relationship with PSL was not based strictly on the legal terms of their arrangement.

80. (e) PSL’s evidence was that the initial discussions were to have the shares in the Company split 50:50 between TGDPL and Sharikat and this would be reflected in the Company’s name (TG-SN Pte Ltd), “TG” and “SN” being the initials of the two shareholders. However, as KYL was contributing towards the tender, PSL proposed that Sharikat and TGDPL each give him 10% of the Company’s shares from their respective shareholdings. OBC and KYL agreed but, due to his financial circumstances, KYL did not take up this option. When cross-examined on why he was initially not concerned that Sharikat would effectively be in the minority if KYL held 20% of the shares, PSL’s response was that he trusted in KYL’s integrity and also the Company was a straightforward investment involving the collection of passive income once the Project was completed. PSL only became worried after disputes between OBC and Sharikat began in late 2007 and it was then that he urged KYL to obtain the agreed 20% shareholding from OBC.

81. (f) A quasi-partnership is characterised by an agreement or understanding that all or some of the shareholders shall participate in the conduct of the business and is an association formed on the basis of a personal relationship involving mutual confidence. It is also evidenced by the informality of the parties’ negotiations and the failure to record their agreements in writing. In this case, the evidence was that KYL, OBC and PSL started out as good friends and trusted one another and that all the discussions before the incorporation of the Company were informal. Further, the parties had entered into agreements verbally in relation to certain aspects of the Project.

82. (g) There was no shareholders’ agreement and this suggests that parties intended the Company to be a quasi-partnership. If there was no quasi-partnership, it is only logical that parties would have insisted on an agreement to enshrine their respective rights.

83. (h) TGDPL, the nominal majority shareholder, and Sharikat had equal representation on the Board and their representatives were co-signatories of the Company’s bank accounts. This situation points to the existence of a quasi-partnership.

84. OBC’s and TGDPL’s arguments

85. [24]

    [24] In response, OBC and TGDPL make the following points:

86. (a) The lack of a formal agreement cannot by itself point to the existence of a quasi-partnership;

87. (b) OBC had candidly admitted that prior to the Project he had no experience in industrial property development and therefore the manner in which Sharikat asserted the responsibilities for the Project should be divided did not give rise to a quasi-partnership;

88. (c) Sharikat’s own case was that it had agreed to hold only 40% of the shares in the Company and therefore it had become a 40% minority shareholder from the date of the Company’s incorporation. TGDPL was a 60% shareholder in the Company from its incorporation up to 29 April 2008 when, upon transferring 9% of the share capital to KYL, it became a 51% shareholder.

89. (d) On the evidence, Sharikat was content to be a minority shareholder because it was not in a financial position to lead the Project and was depending on TGDPL’s financial support. Sharikat knew that TGDPL had not agreed to incorporate the Company on a quasi-partnership basis and that OBC wanted to be the boss. There was no trust between OBC and PSL such that OBC would agree to equal shareholding or allow Sharikat to dictate the Company’s direction;

90. (e) Sharikat claimed that when its original proposal of a 40:40:20 shareholding could not be effected, it had agreed to let TGDPL hold 60% of the shares in the Company on the basis that the additional 20% were held on trust for the benefit of KYL. Sharikat gave no reason why it had agreed to let TGDPL hold all KYL’s shares if it had wanted TGDPL to have no more shares than itself. In any case, under Art 7 of the Memorandum and Articles of Association of the Company, shares held on trust are not recognised.

91. (f) It was not true that PSL had proposed the shareholding structure be 40:40:20 in favour of Sharikat, TGDPL and KYL respectively. Actually, he had suggested that they hold the shares in the proportions 30:50:20. His explanation of how parties changed the shareholding structure when the Company was incorporated to 40:60 was untrue. OBC had always wanted to be the majority shareholder so that he could control the Company’s business and he had rejected the 30:50:20 proportions because such a distribution of shares could result in a deadlock. KYL rejected PSL’s proposal because he could not afford to acquire 20% of the shares.

92. (g) If indeed the Company was intended to be a quasi-partnership, then Sharikat’s concerns over the percentage of shareholding at the outset would be unnecessary. Indeed, PSL had admitted in court that he had not heard the term “quasi-partnership” until Sharikat engaged a lawyer.

93. (h) It was clear from OBC’s evidence that the Company was a joint venture; not a partnership. OBC did not use the word “partner” in the strict legal sense. During re-examination he explained that he treated whoever worked with him as a partner and even regarded his banker as his partner because his bank funded his operations and he and they had a certain working relationship.

94. (i) Sharikat’s case that the Company was intended to be a quasi-partnership was not truthful because JTC had imposed, as a condition of the award of the Project to the Company, that TGDPL would hold at least 60% of the shares in the Company.

95. (j) Both OBC and PSL had dealt with each other as experienced and seasoned businessmen. They were savvy enough to understand the implications of forming a company under the Act. It was not up to one party to unilaterally contend that there was an intention to form a quasi-partnership after the formation of the Company.

96. (k) The instances which Sharikat cited in support of its contention that the parties reposed trust and confidence in each other were misconceived. Sharikat had been confusing latitude given to the minority with trust and confidence.

97. [25]

    [25] The first and fourth defendants also urged me to take into account other facts which they submitted would negate the assertion that the Company was a quasi-partnership. They noted the following:

98. (a) At all material times, Sharikat had replied on OBC’s resources to bid for the Project and that was why it was content to let TGDPL be the majority shareholder in Sharikat.

99. (b) OBC and TGDPL were required to furnish guarantees to JTC under the building agreement and JTC also required TGDPL to show that it had a fixed asset investment of $2.5m in buildings and civil work.

100. (c) OBC and TGDPL incurred various financial commitments for the Project:

101. (i) They funded 20% of the contract sum, ie, $700,000, for the Project.

102. (ii) They each furnished a guarantee to Hong Leong for the construction loan.

103. (iii) They injected funds into the Company in excess of TGDPL’s 60% share capital. This resulted in the Company owing TGDPL the sum of $375,120.

104. My decision

105. [26]

     [26] I am satisfied that on balance it was Sharikat’s intention, which the other parties agreed to, that the Company should be run on partnership principles with each shareholder having a say in its operation and not on the basis of normal company principles which give the final say to the majority shareholder. Whilst PSL did not know the term “quasi-partnership” when he went into the Project, this does not mean that he did not have such an arrangement in mind when the Company was formed.

106. [27]

     [27] It is clear from PSL’s evidence that having heard of the invitation to bid for the Project he wanted to work jointly with KYL on it and subsequently agreed to bring OBC in because of the parties’ friendship and, no doubt, the financial muscle that OBC could add to the Project. Although OBC denied it subsequently, the evidence showed that at the outset OBC and PSL had been friends and he had trusted PSL who had brought the Project to him. The parties had wanted to work together for some time as shown by the previous joint bids that they had made. As Sharikat submitted, there would have been every reason for the parties to agree to an equal shareholding and say in the Company. OBC himself referred in court several times to the friendship and trust between himself and PSL and the “gentleman’s agreement” between them.

107. [28]

     [28] I do not agree that the evidence shows that at the outset, Sharikat was content to be a minority shareholder. At the outset and for some time thereafter, there were only two directors in the Company and thus Sharikat had an equal say in its running. The parties were not inclined to document their dealings and this is another indication of the level of trust that existed between them.

108. [29]

     [29] Sharikat maintained that KYL shares were meant to be held on trust by TGDPL. I accept the evidence that the original intention was for there to be three shareholders: PSL, KYL and OBC. I also accept PSL’s explanation that he did not consider that giving 20% of the shares to KYL would allow OBC to dominate because he trusted his old friend to do what was right and, in any case, he did not contemplate any great complexity in running a company which would simply be receiving rental income after the Project was completed. When KYL was not able to take up the shares due to financial constraints, I accept that PSL agreed to TGDPL taking them up on KYL’s behalf and holding them on trust for him. There was no reason to doubt that OBC, KYL’s brother-in-law, could be relied on to transfer the shares to KYL once the latter was in a position to pay for them. The fact that the Memorandum and Articles of Association of the Company does not recognise trusts over shares is irrelevant. The existence of Art 7 does not prevent the existence of a trust and the creation of equitable interests in shares. The courts have seen many cases in which the beneficial ownership of shares has been disputed and have never disposed of such cases on the basis that the Articles of the company concerned expressly refused to recognise equitable interests in share capital.

109. [30]

     [30] The argument that Sharikat had given no reason as to why it had agreed to let TGDPL hold all of KYL’s shares if it had taken care to propose that TGDPL hold an equal percentage of shares in its original proposal, is unfounded. In court, PSL stated that the parties had always intended that KYL would take up the shares held on his behalf and that his shares were merely “parked” under TGDPL.

110. [31]

     [31] It is not correct either that a condition of JTC’s award of the Project to the Company was that TGDPL would hold at least 60% of the shares of the Company. PSL’s testimony was that the arrangement for TGDPL to hold 60% of the shares, including KYL’s 20%, was reached prior to JTC’s Selection Letter and the parties had therefore informed JTC that the Company would be structured such that TGDPL would hold 60% of the shares. I accept this testimony. There was no particular reason for JTC to insist on TGDPL holding 60% of the shares and no evidence that JTC had, in its tender documents, required that the majority of the shareholding be held by any particular party with any particular financial structure. In the later Offer Letter, JTC referred to information given to it by TGDPL that there would be a new company incorporated to carry out the Project in which TGDPL and Sharikat would be shareholders. This was consistent with PSL’s evidence as to what was told to JTC. Arguably, what was important to JTC, as expressed in its letter, was that the Company should have a paid-up capital of at least $500,000 and that due proof of this paid-up capital would be shown to JTC. Provided that the Company had the requisite paid-up capital, the proportions in which this was held by the shareholders would not matter to JTC.

111. Is the Company a single purpose company?

112. [32]

     [32] Sharikat asserts that the Company was a single purpose company incorporated only to undertake the Project. OBC and TGDPL say that it was incorporated to undertake industrial property projects generally and not only the development at Banyan Drive.

113. Sharikat’s arguments

114. [33]

     [33] Sharikat relies on JTC’s Selection Letter to substantiate its position on the nature of the Company. In the Selection Letter, JTC noted that in the “Application Form” for “Proposal To Develop & Manage The Process & Maintenance Facility”, TGDPL had stated that it intended to “incorporate a subsidiary company as a single purpose vehicle” to own, develop and manage the facility. In court, OBC agreed that TGDPL had told JTC on 3 March 2006 in the bid submissions that the sole purpose of the Company was to own, develop and manage the Project. He also agreed that it was not a requirement of JTC that the Company should be a single purpose vehicle. KYL too agreed that there was no such requirement on the part of JTC.

115. [34]

     [34] The bid submissions were not produced in court. Sharikat argued that I should draw an adverse inference against TGDPL in this respect. Prior to the trial, Sharikat’s solicitors had asked TGDPL’s solicitors for the bid submissions but were informed that they were actually a set of presentation slides that had already been disclosed. In court, however, OBC confirmed that the bid submissions and the presentation slides were different aspects of the JTC tender. Sharikat submitted that no explanation had been given as to why the bid submissions were not in OBC’s or TGDPL’s possession, custody or control and therefore an adverse inference ought to be drawn that the documents showed that the Company had been incorporated as a single purpose vehicle.

116. [35]

     [35] In court, OBC had said that “single purpose” in the context of the letter meant that the Company was only to run industrial projects. Sharikat submitted that this position was not credible. Further, OBC had been shown the transcript of the meeting held on 14 February 2011 at which PSF had said that the Company was “formed in Day One is [sic] to look into this Banyan Drive Project” and Ms Joanne Chong Ker Shin (“Ms Chong”), an employee of the TG Group who was involved in many of the discussions, had agreed. OBC was present at the meeting and he admitted in court that he did not say then that the purpose of the Company was only to run industrial projects.

117. OBC’s and TGDPL’s arguments

118. [36]

     [36] In response OBC and TGDPL make a number of points. These are as follows:

119. (a) First, OBC’s evidence was that he had agreed to participate in the Project with Sharikat because he did not have experience in industrial property projects and had wanted to venture into this area by leveraging on Sharikat’s experience. In his mind, the Company was intended to undertake industrial property projects, not just the Project. OBC’s evidence was credible especially in the light of what PSL himself had said.

120. (b) In PSL’s narration of how the Company was conceptualised and incorporated, he had never asserted that he, OBC and KYL, had all agreed that the Company was meant to be a single purpose company. He also said that he had decided to involve other parties in the Project to create the potential to explore “future joint business opportunities”. In fact, it had not been part of Sharikat’s original statement of claim that the Company was a single purpose one and this assertion had only been added when the statement of claim was subsequently amended.

121. (c) At the meeting of 14 February 2011, the exchange between PSF and Ms Chong was a brief one consisting only of the following:

122. (d) It was difficult to see how Sharikat’s case could be made out from that brief exchange. PSF did not assert that the Company had been incorporated solely for the Project. If that was the case, his suggestion during the same meeting on how more funds could be raised for future projects would directly contradict his single purpose assertion. The meeting went on to discuss whether dividends should be declared instead of keeping the accumulated profits for future projects. The discussion never excluded the possibility of the Company undertaking further projects.

123. (e) When Sharikat’s solicitors sent its first letter of demand on 11 February 2011, this letter did not mention that the Company had been incorporated as a single purpose company.

124. (f) As regards JTC’s letter, the application form which it referred to was not produced in court. OBC had explained that he might have signed an application form but he did not fill it in and he was not in a position to explain the context of JTC’s reference to “a single-purpose” vehicle. Sharikat had made no attempt to obtain a copy of the application form from JTC even though it bears the burden of proving that the Company is a single purpose one.

125. (g) The legal position is that if a company was intended to be a “single purpose” company, this must be indicated at the outset. It is not sufficient for a shareholder to contend, after the company’s formation, that it is a single purpose one. During cross-examination, PSL confirmed that the words “single purpose” were not used when he, OBC and KYL discussed the formation of the Company.

126. My decision

127. [37]

     [37] I accept Sharikat’s position that the initial intention of all the parties was to incorporate the Company for the express purpose of constructing the 18 Units comprised in the Project and thereafter renting them out. PSL’s evidence was that KYL, OBC and he had agreed that if they won the tender from JTC, TGDPL and Sharikat would incorporate the Company as “a joint venture to develop the Project”. This evidence was contained in PSL’s affidavit of evidence-in-chief (“AEIC”). KYL and OBC did not dispute that this was the initial consensus. Further, neither of them asserted that, prior its incorporation, the parties had discussed the possibility of using the Company for purposes other than the Project. This possibility was only raised several years later.

128. [38]

     [38] The Selection Letter noted that TGDPL “intend[ed] to incorporate a subsidiary company as a single-purpose vehicle to own, develop and manage the Process Maintenance Facility”. JTC could only have gleaned this intention from the bid submissions which were put in by TGDPL and signed by OBC. TGDPL should have kept a copy of the submissions and no satisfactory explanation was given as to why it did not produce the same in discovery. I do not accept the argument that Sharikat had the burden of obtaining this document from JTC since it was a document that had been prepared by TGDPL. I find the Selection Letter to be convincing evidence of the parties’ intentions at the outset.

129. [39]

     [39] It is correct that the original letter of demand and the original statement of claim had not referred to the Company having been incorporated as a “single purpose” company. I accept Sharikat’s explanation that the reason for the omission was that originally whether the Company was a single purpose one or not was not a live issue. It was only when OBC and TGDPL proposed the rights issue on the basis that the Company needed to raise funds for new projects (ie, after proceedings had been started and the statement of claim filed) that it became necessary for Sharikat to amend its statement of claim to state specifically that the Company had been incorporated solely for the Project. In any case, the two documents mentioned did in their own way indicate that Sharikat considered the Company to be a single purpose one. First, the letter of demand stated that it had been agreed that a joint venture company would be incorporated for the purpose of developing the Project. Second, the original statement of claim spelt out that the purpose of the Company was for the “building and leasing out [of] 18 units of single storey terrace factories … at Banyan Drive, Singapore”.

130. [40]

     [40] I also note that prior to the Project, PSL, OBC and KYL had not all worked together in respect of any development. It made sense for them to agree to get together for a specific purpose and see how that turned out before getting involved in on-going business. It also made business sense to use the Company as a single purpose vehicle since the Project was a self-contained one and, once it was completed, the income from the Project would be capable of paying off any loan taken for construction purposes. It is also relevant that the Company was incorporated after the Selection Letter. The parties did not set up a company in order to go into business together generally: they set up a company in order to carry out the construction and development of the Units in accordance with the bid submissions that were accepted by the Selection Letter.

131. Allegations of oppressive conduct by OBC and TGDPL

132. The agency fee issue

133. (1) Background

134. [41]

     [41] The purpose of the Project was to build the Units which would subsequently be rented out to entities approved by JTC. According to Sharikat’s pleaded case, in March 2006, OBC, KYL and PSL agreed that TG Realty would be appointed as the estate agent to secure tenants for the Units and that it would be paid an agency fee to be negotiated at the relevant time.

135. [42]

     [42] In April 2006, JTC informed the Company that the Units had been “matched” to various companies which had asked JTC for offices and workshop areas within Jurong Island. JTC informed PSL and KYL that they had to negotiate leases and rentals with these companies and that the Units should be built to specifications that suited these companies’ needs. In due course, on completion of the Project, these companies became the tenants of the Units.

136. [43]

     [43] PSL’s evidence was that after receiving the list of matched tenants from JTC, he assumed that no agency fees would be paid to TG Realty because it had not done any marketing or incurred any expense to secure the tenants.

137. [44]

     [44] In late 2007, the Company received an invoice for $50,000 from TG Realty. When PSL enquired about this invoice, KYL explained that it was for agency fees for TG Realty. PSL refused to authorise payment to TG Realty as it had not secured the tenants and he was not clear how the sum of $50,000 had been arrived at.

138. [45]

     [45] PSL asserted that during discussions between himself, OBC and KYL on the matter, they agreed that Sharikat would handle the Company’s accounts free of charge (apart from monthly disbursements of $200) in return for TG Realty not claiming agency fees. Matters did not end there. Further discussions took place at a meeting held on 30 May 2008. All three shareholders (ie, including KYL) were present. The parties have different versions of what was said at the meeting and the minutes prepared by Ms Chong went through several versions. In all versions, it was stated that PSL did not agree to commission being payable to TG Realty and that OBC objected and mentioned that TG Realty had been represented by KYL and had put in much effort into recruiting tenants. In one version, it was stated that OBC proposed a vote on the issue of approving the commission and that although PSL objected and KYL abstained, OBC approved the payment and because he held 51% of the voting rights, the commission payable to TG Realty was approved. Another version of the minutes stated that PSL voted against the resolution, KYL abstained and OBC voted in favour but in the end it was decided that the matter should be resolved in the next meeting without a special resolution.

139. [46]

     [46] The parties were unable thereafter to resolve the dispute over the agency fees. At the shareholders’ meeting held on 10 November 2008, the payment of agency fees to TG Realty was approved by KYL and TGDPL in spite of Sharikat’s objections. On 15 March 2011, OBC and OKH authorised payment of the $50,000 to TG Realty.

140. [47]

     [47] Sharikat complains that the approval and payment were oppressive acts.

141. (2) The arguments

142. [48]

     [48] OBC and TGDPL make the following points to rebut the allegation of oppression:

143. (a) There was an agreement between Sharikat and TGDPL that TG Realty would be entitled to a fee in relation to the tenancy of the Units and this agreement was reached right at the beginning when parties discussed the possibility of co-operating on the Project. At the time of this agreement, Sharikat was aware that there was a pool of potential tenants since this information had been conveyed by JTC when it asked for bids.

144. (b) PSL admitted that he was aware that prospective tenants were those who were already carrying out business at Jurong Island and the only uncertainty was whether they would take up all the Units. He told the court that he had not approved the payment to TG Realty as it did not work hard enough to deserve the fees as it was JTC that had secured the tenants.

145. (c) When the agreement to pay agency fees was made, Sharikat had not specified any condition to be fulfilled by TG Realty before it was entitled to payment. TG Realty had obtained a list of potential tenants from JTC and had secured the actual tenants from that list and worked out the details of the tenancy agreement with the tenants and concluded the same.

146. (d) Fortuitously for TG Realty, it did not have to expend as much resources to secure the tenants as Sharikat expected and it would be oppressive for Sharikat to deny TG Realty payment because it thought that that company did not work hard enough to deserve the fees.

147. (e) Although Sharikat argued that there was no agreement that the amount would be $50,000, in Sharikat’s draft of the minutes of the 30 May 2008 meeting, Sharikat had inserted “Mr Joseph Phang agreed … and said that an amount of S$50,000 payable to TG Realty Pte Ltd for the above work done or direct cost/expenses incurred”. Therefore, Sharikat had agreed to the sum of $50,000 for the work done or direct cost/expenses incurred. PSL’s objection was to the amount being classified as “commission”.

148. (f) Even if PSL did not intend for the sum of $50,000 to be paid out, contrary to the minutes of the meeting, it would still not be an oppressive action as TGDPL, as the majority shareholder, did not depart from the standards of fair dealing and conditions of fair play which it had to observe as determined in Over & Over.

149. (3) My decision

150. [49]

     [49] I accept that the parties had agreed early in their dealings with each other that TG Realty should be appointed to obtain tenants and would be paid a fee for so doing. At that time, JTC’s “Request for Proposal” was in their hands and they would all have been aware that in para 6.7 of the same, JTC had stated that the “awarded developer should give priority to the readily [sic] pool of demand as identified by the [JTC]”. However, that did not mean that they were aware that all the tenants would be found by JTC.

151. [50]

     [50] As it turned out, JTC did not have just a pool of potential tenants, it identified a specific tenant for each of the Units and gave the Company no leeway in the allocation of the Units. One of the tenants, Mr Tan Ngerng Heng, testified that JTC had conceived the Project at the request of the tenants themselves and told them that the developer would tailor-build the Units to meet the tenants’ requirements. After the Company’s tender was accepted by JTC, JTC introduced Mr Tan and the other tenants to PSL and KYL as the Company’s representatives. JTC told the tenants to liaise with these two men regarding the tenants’ specific requirements and the terms of the leases. Mr Tan said that thereafter his discussions were with these gentlemen only. As far as he could recall, his only interaction with anyone apart from KYL and PSL was when certain employees of the TG Group of companies dealt with him to facilitate the signing of the tenancy agreement.

152. [51]

     [51] On the evidence, TG Realty did not need to undertake any marketing activity to acquire tenants for the Units. As far as negotiating with the tenants was concerned, this work was done by PSL and KYL. However, it was OBC’s stand at the 30 May 2008 meeting that KYL had been acting for TG Realty in recruiting tenants, organising follow-up meetings with JTC on tenants’ requirements and negotiating with JTC. In his AEIC, KYL said that he had assisted PSL in the day-to-day matters relating to the Project. He made no mention of having been engaged or requested by TG Realty to work with the tenants on its behalf. Thus, in all likelihood, any work that KYL did in respect of the tenancies and the tenants was done on behalf of the Company and not on behalf of TG Realty.

153. [52]

     [52] On the evidence, TG Realty’s role in relation to the tenants and the tenancies was administrative at best. Whilst I accept that there was an agreement for TG Realty to act as the agent for the Units and to be paid for this work, I also accept that when this agreement was reached no specific fee arrangement was concluded. I would infer that at the time the parties probably thought that TG Realty would charge agency fees on the basis of the rental agreements concluded, the fee being a percentage of the rent as is common in such transactions. Prior to the 30 May 2008 meeting, I am satisfied that there was no agreement for TG Realty to be paid $50,000 for the work that it had done and that its invoice for this amount came as a surprise to Sharikat. It bears emphasising that the amount claimed was just the lump sum with no breakdown or indication how it had been arrived at.

154. [53]

     [53] The question is whether Sharikat agreed to the $50,000 fee on 30 May 2008. OBC gave no direct evidence in his AEIC on what happened at that meeting. He simply reproduced the following extracts from one version of the minutes of the meeting:

155. The above portions of the minutes were the same portions that OBC/TGDPL relied on in their closing submissions to bolster their argument about Sharikat’s agreement.

156. [54]

     [54] PSL’s evidence was that at the 30 May 2008 meeting, he objected to the proposed payment to TG Realty on the grounds mentioned earlier. He also pointed out that the amount to be paid to TG Realty had never been agreed upon. However, he had tried to be reasonable and said that TG Realty could claim any legitimate expense if it could prove that it had incurred such expense. In court, PSL maintained that his agreement had been limited to paying TG Realty what it could justify as expenses incurred in dealing with the tenants and that he had not agreed to a lump sum of $50,000.

157. [56]

     [56] The matter was not resolved by agreement subsequently. Under cross-examination, OBC admitted that at the 10 November 2008 EGM, he and KYL had joined forces to push through a resolution for the payment of the commission to TG Realty against opposition from Sharikat. He further agreed that on 16 March 2011 he and his son OKH had signed the cheque in TG Realty’s favour for the commission. He justified this on the basis that the resolution had been passed but he agreed that he was aware that Sharikat still objected to the payment.

158. [57]

     [57] In the circumstances, I find that TGDPL as a majority shareholder had acted oppressively when it authorised payment to its related company TG Realty of the sum of $50,000 when this amount had not been agreed to by Sharikat and there was no legal obligation on the Company to pay the same. Its action in forcing through the resolution authorising payment, and OBC’s in signing the cheque, breached the standards of fair play that Sharikat was entitled to expect. They were also against Sharikat’s legitimate expectations as a quasi-partner in the Company that the Company would be run in its interests as well as those of TGDPL. I will deal with OKH’s position later.

159. The accounting and administrative fee issue

160. [58]

     [58] Sharikat’s complaint is that OBC, KYL and TGDPL acted oppressively in approving the payment of fees for past Services rendered to the Company by the TG Group while refusing to pay fees to Sharikat for similar services.

161. [59]

     [59] The origin of this complaint lies in the fact that the Company had no staff and therefore the Services had to be provided by a third party. At different periods, different parties provided the Services as follows:

162. (a) TG Realty from 21 April 2006 to 4 December 2007;

163. (b) Sharikat from 1 November 2007 to 20 November 2008; and

164. (c) a member of the TG Group from 21 November 2008 onwards.

165. [60]

     [60] TG Realty was paid a fee of $1,000 per month for the Services between 16 June 2007 and 31 October 2007. Sharikat was paid nothing, but after 21 November 2008, the service provider was paid $1,500 per month.

166. [62]

     [62] Ms Chong prepared the minutes of the 30 May 2008 meeting. The material portions of the first draft of the minutes are as follows:

167. [63]

     [63] Sharikat subsequently suggested some amendments to these portions of the minutes but such amendments did not change the essence of what had been agreed. Therefore, it is safe for me to use these draft minutes as reflecting what took place in relation to these items.

168. [64]

     [64] The parties did obtain quotations from three independent organisations and each of these quoted a fee of $1,500 per month.

169. [65]

     [65] The matter was next raised at the EGM of 10 November 2008. This was the meeting at which TG Realty’s commission of $50,000 was approved by a majority vote. As regards the provision of the Services, the minutes record the following:

170. [66]

     [66] From the two sets of minutes, it appears that on 30 May 2008, Sharikat withdrew its agreement to provide the Services for free. On the same date, TGDPL and Sharikat agreed that companies that had provided Services hitherto should be paid according to the lowest quote to be obtained from an independent company. At the 10 November 2008 EGM, OBC wanted to take back the provision of Services from Sharikat and pay a fee of $1,500 per month to whichever company provided them in the future. All parties agreed to this proposal. However, TGDPL then used its majority voting power to resolve that Sharikat should not receive any payment for the Services it had provided. This was an apparent reversal of what had been agreed to by TGDPL in May 2008.

171. [68]

     [68] Accordingly, it was submitted, OBC’s reason for not paying TG Realty and Sharikat was not tyrannical. Instead, it was motivated by what he considered to be fair to the Company, having regard to the parties’ earlier promises to the Company. Sharikat’s insistence that it should be paid for its Services which it had earlier agreed to render for free showed up Sharikat’s propensity to take advantage of others, even if it had to renege on its agreement.

172. [69]

     [69] I think that this situation is a rather equivocal one and that the benefit of the doubt should be given to TGDPL. What emerged clearly from the evidence was that in the initial stages there was no formal arrangement regarding provision of the Services by either TG Realty or Sharikat. The respective parties provided the Services without necessarily requiring remuneration. It was only in March 2008 that PSL made the suggestion that Sharikat would not charge for the Services if TG Realty did not charge commission. There was, apparently, no discussion prior thereto whether the Company should pay its shareholders for Services and, if so, at what rate. Since Sharikat had originally been prepared to provide the Services for free, and since TG Realty also did so for all but the period of four months after May 2008 (when it had been agreed that Services should be paid for henceforth), I think that on balance it was not oppressive for TGDPL to vote against paying Sharikat for past Services.

173. Refusal to pay project management fee to Sharikat

174. [70]

     [70] It is not disputed that PSL, OBC and KYL had agreed that PSL would be appointed to supervise the construction of the Project and that a fixed fee of $15,000 would be paid for such supervision. PSL was so appointed but no project management fee was ever paid.

175. [71]

     [71] According to PSL, on 30 May 2008, he reminded the other shareholders of the agreement to pay Sharikat a project management fee. Neither OBC nor KYL, who were both present at the meeting, denied this agreement. Sometime later, Sharikat informed TGDPL that it intended to set off the amount of $15,000 from the sums owed by Sharikat to the Company. OBC, however, refused to recognise that this sum of $15,000 was due to Sharikat and refused to allow a set off.

176. [72]

     [72] The defendants’ position is that the Company has never refused to make payment of this item. The problem was, as OBC asserted in his AEIC, PSL and Sharikat had simply refused to issue an invoice to the Company in respect of this claim. Then they accused OBC of controlling the Company and denying the payment. That was not true. An invoice was required for legitimate accounting reasons and the defendants could not understand Sharikat’s reluctance to issue an invoice.

177. [73]

     [73] In their closing submissions, OBC and TGDPL stated that by the start of the trial it was clear that all that TGDPL wanted was for Sharikat to submit an invoice. Further, PSL clarified in court that there was no problem in issuing the invoice and it would be reasonable to do so. OBC/TGDPL submitted that PSL/Sharikat’s refusal to issue an invoice was disruptive behaviour. Eventually, Sharikat unilaterally set off the project management fee against its indebtedness to the Company as stated in its solicitors’ letter of 24 February 2012.

178. [74]

     [74] Sharikat submitted in response that the Company and OBC had never requested it to issue an invoice. Therefore, it was entirely reasonable for it not to have issued one and the lack of the invoice was not a legitimate excuse to refuse payment of the project management fee. One of the tests of oppression is whether there has been a visible departure from the standards of fair dealing and violation of the conditions as of fair play which a shareholder is entitled to expect. Given that there was an agreement at the outset to pay Sharikat’s project management fee, Sharikat submitted that OBC’s and TGDPL’s conduct in refusing to do so was yet another means of oppressing Sharikat’s interest as a minority shareholder.

179. Wrongful progress claims issued by TG Properties

180. [76]

     [76] It is Sharikat’s case that OBC, with the assistance of KYL and OKH acted oppressively by causing the Company to pay TG Properties for work that it did not carry out for the Project. The work which TG Properties claimed for and which Sharikat asserts was not done, comprises:

181. (a) the ACMV works; and

182. (b) the Variation Works.

183. Sharikat submits that payment of these claims benefited TG Properties and OBC to the detriment of the Company and were therefore also made in breach of OBC’s fiduciary duties.

184. [77]

     [77] The background to this allegation can be stated briefly. As noted above, TG Properties was awarded the main building contract for the Project at the contract sum of $3.5m. The actual construction was done by subcontractors. As the building works progressed, TG Properties received payment by way of progress claims which had been prepared on its behalf by KYL. Each progress claim was submitted for certification to the Project Architect and upon such certification, the Company would pay the claim.

185. [78]

     [78] In all, TG Properties issued ten progress claims to the Company for the Project starting with Progress Claim No 1 which was dated 20 September 2006. Each of the progress claims was duly certified by the Project Architect.

186. [79]

     [79] In December 2010, Sharikat discovered:

187. (a) that Progress Claims Nos 2 to 10 each included an item described as “Air-conditioning & Mechanical Ventillation [sic]” and that a total of $213,000 had been claimed in respect of this item; and

188. (b) claims totalling $181,680 had been made under an item described as “VARIATIONS [sic] WORK” in Progress Claims Nos 9 and 10.

189. (a) KYL had included items of work in the progress claims which had not been carried out and/or were not supported by variation orders;

190. (b) the Project Architect had not properly verified the legitimacy of the progress claims submitted by KYL prior to certifying them; and

191. (c) the unjustified claims had been orchestrated by OBC with the cooperation of KYL. As a majority shareholder of TG Properties, OBC was the only person who would directly benefit from the inflation of the progress claims.

192. [81]

     [81] In December 2008, PSL was asked to sign a cheque which had been issued by the Company as payment to TG Properties of Progress Claim No 10. The cheque had already been signed by OBC. PSL refused to sign it because of a dispute with OBC regarding the profit-sharing agreement. Subsequently, in December 2010, PSL was asked to sign another cheque in favour of TG Properties in respect of Progress Claim No 10. It was prepared on OBC’s instructions. PSL refused again.

193. [82]

     [82] In March 2011, after OKH had been appointed as a director of the Company and the bank mandate had been varied to allow the Company’s bank account to be operated by one signatory from Group A (comprising OBC alone) and one signatory from Group B (comprising OKH and PSL), OBC and OKH signed a cheque for $183,750 in favour of TG Properties in payment of Progress Claim No 10. TG Properties received payment of this claim shortly thereafter.

194. [83]

     [83] OBC and TGDPL reject the insinuation that fraudulent progress claims were prepared on behalf of TG Properties. Their position is as follows:

195. (a) PSL was the director in charge of the Project and handled all matters relating to it. He appointed all key personnel for the Project including the Project Architect and the suppliers and subcontractors and approved all payments to them. Further, he was regularly on site supervising the construction of the Units.

196. (b) PSL had full knowledge of the basis of all the progress claims as he approved all of them and signed the cheques for all of them (except for Progress Claim No 10).

197. (c) The preparation and submission of all progress claims were discussed with PSL and KYL and they were certified by the Project Architect.

198. (d) Of the ten progress claims issued by TG Properties and certified by the Project Architect, Progress Claims Nos 1 to 9 were issued, certified and paid between September 2006 and June 2007. At that time, only KYL and PSL were the signatories of the Company’s bank account; OBC was not a signatory.

199. (e) It was the legitimate expectation of OBC and TGDPL that PSL would carry out his duties responsibly and diligently and there was no reason for them to believe that the progress claims were fraudulent.

200. (f) Progress Claim No 10 was issued and certified in September 2008. Sharikat’s initial reason for not approving payment had to do with a different dispute and it was only two years later that PSL refused to authorise the payment on account of “fraudulent claims”.

201. [84]

     [84] OBC/TGDPL also submit that Sharikat’s pleaded case gave the impression that Sharikat was not aware of the claims made. In addition, although the statement of claim insinuated, by way of a heading, that fraudulent progress claims had been made, the allegation of fraud was not specifically pleaded. During the trial, PSL and PSF initially took the position that the progress claims were fraudulent but subsequently each of them changed his position and conceded that there was no fraud. In fact, OBC/TGDPL asserts, the allegation of the progress claims being fraudulent is itself fraudulent.

202. [85]

     [85] OBC stated that when he first became aware of Sharikat’s allegation that he was involved in issuing fraudulent progress claims, he responded to these allegations through his counsel in a letter dated 11 March 2011. This letter asserted that PSL had participated in the management of the Company and the Project from the outset and could not claim ignorance or oppression. PSL had worked closely with the Project Architect in managing the Project, including certifying progress claims and approving payment to various parties including Sharikat itself. Therefore, if there was any fraudulent claim, Sharikat who had authorised PSL to certify such payment, would be in the best position to answer them.

203. [86]

     [86] Further, OBC submits that he had repeatedly invited PSL to assist in the investigation of the matter. When the allegation of fraud was first brought to his attention by PSF on 4 January 2011, OBC had agreed that it was a serious matter and ought to be investigated. Another EGM was held on 14 February 2011 to look into this allegation and at that meeting OBC informed PSF that as he did not have personal knowledge of the construction works, he required PSL and KYL to assist in investigation. Further, as PSL had signed the Company’s account, he did not know that PSL had issues with the accounts. Despite this, PSL did not attend at the directors’ meeting held on 29 March 2011 to look into this allegation. At an AGM held on 22 July 2011, Sharikat was represented by PSL, PSF and one James Chia. OBC informed the meeting that he required the assistance of PSL to provide details of the alleged fraud. The minutes did not record PSL as having said anything and the matter was left unresolved.

204. [87]

     [87] Moving on from the parties’ submissions, in order to decide whether there was oppressive conduct on the part of OBC/TGDPL, it is necessary to consider what actually happened. It was common ground that PSL was appointed to supervise and did supervise TG Properties’ work in relation to the construction of the Units. There is no doubt that he was regularly on site supervising the construction. He admitted in court that he was actively involved in the Project and would check the materials supplied, the unit rates and the claims made by the subcontractors. He also agreed with the Project Architect’s statement that she had always called PSL on the phone after the issue of the architect’s certificates and he would arrange for them to be collected so that payment of the progress claims could be facilitated. On balance, he must have been aware of the contents of the progress claims, in general, even if not in detail.

205. [88]

     [88] In my view, however, the issue of whether the progress claims were fraudulent is a red herring. The main issue is whether Progress Claim No 10 should have been paid once a credible objection to it had been raised. There is also, in my judgment, a distinction to be drawn between the Variation Works and the ACMV works.

206. [89]

     [89] In respect of the Variation Works, PSL admitted that he knew exactly what Variation Works the subcontractors had made claims for because he had given the instructions for those works. He said that he did not complain about the subcontractors making their claims for the extra work as they had done the same and had to be paid. However, as far as TG Properties was concerned, as the main contractor making the claim against the Company, it needed to have an architect’s instruction (“AI”) and he considered that no payment could be made to TG Properties for any variation work that did not have the support of an AI. I consider that argument to be excessively technical in the circumstances of this case. The work had been done; PSL had knowledge that it had been done and that it had been paid for; I do not think that he could validly object to paying TG Properties in turn. As the person who gave the instructions for the extra work, he could have made sure that there was an AI for every item of such work. Having failed to do so, he cannot rely on the absence of the AI to challenge the payment. In any case, since TG Properties would have to be reimbursed for what it paid the subcontractors (the Company could not expect to get this work for free), it would not be oppressive for OBC/TGDPL to ensure that such payment was made.

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